Critical Reappraisal of Sovereign Debt Sustainability for Economic Development of Low Income Countries
peaker: Machiko Nissanke, Emeritus Professor of Economics, SOAS University of London
Chair: Victor Murinde, AXA Professor in Global Finance, SOAS University of London
Time: Wednesday, 20th February 2019, 13:00-15:00
Venue: S314, SOAS University of London (Paul Webley Wing)
Chair: Victor Murinde, AXA Professor in Global Finance, SOAS University of London
Time: Wednesday, 20th February 2019, 13:00-15:00
Venue: S314, SOAS University of London (Paul Webley Wing)
Abstract
Drawing in part on my chapter in the forthcoming Palgrave Handbook of Development Economics, I present a critical reflection on how to secure sovereign debt sustainability for economic development of LICs. My seminar talk is set in the context of the rising debt distress in several SSA countries over the recent years as well as the evolution of the academic and policy debates on the ‘aid-debt-growth’ nexus. After critically evaluating the constructs of the IFIs’ Debt Sustainability Framework in use of LICs, I discuss alternative approaches to sovereign debt sustainability. These entail: a) a system of prudent resource and debt management, including sound selection of debt-financed projects with large developmental dividends and spill-overs in light of a country’s absorptive capacity, and close performance monitoring at micro and macro levels; b) choice and packaging of appropriate financial instruments; and c) a clearly agreed procedure, backed up with global facilities laid out at the onset in debt contracts, on how to deal with downside risks and debt distress conditions in order to facilitate an orderly debt restructuring and workout process. Against these conditions, I evaluate the prospects of the emerging debt problems in Africa, in particular in relation to the growing portion of sovereign debt owed to private creditors and non-traditional concessional loan providers, and the way forward with their sovereign debt restructuring mechanisms.
Drawing in part on my chapter in the forthcoming Palgrave Handbook of Development Economics, I present a critical reflection on how to secure sovereign debt sustainability for economic development of LICs. My seminar talk is set in the context of the rising debt distress in several SSA countries over the recent years as well as the evolution of the academic and policy debates on the ‘aid-debt-growth’ nexus. After critically evaluating the constructs of the IFIs’ Debt Sustainability Framework in use of LICs, I discuss alternative approaches to sovereign debt sustainability. These entail: a) a system of prudent resource and debt management, including sound selection of debt-financed projects with large developmental dividends and spill-overs in light of a country’s absorptive capacity, and close performance monitoring at micro and macro levels; b) choice and packaging of appropriate financial instruments; and c) a clearly agreed procedure, backed up with global facilities laid out at the onset in debt contracts, on how to deal with downside risks and debt distress conditions in order to facilitate an orderly debt restructuring and workout process. Against these conditions, I evaluate the prospects of the emerging debt problems in Africa, in particular in relation to the growing portion of sovereign debt owed to private creditors and non-traditional concessional loan providers, and the way forward with their sovereign debt restructuring mechanisms.